Hey, who’s up for another massive stimulus package?

posted at 10:41 am on June 13, 2012 by Ed Morrissey

I guess we can call this Hairofthedogonomics. Europe and the US got drunk on debt and ended up over their heads. Everyone tried borrowing more money to stimulate economic growth, promising that this time, it would create such a large amount of growth that it would cover the cost of the borrowing. As the new and inevitable second hangover kicks in and we take a look at the bill, what do world leaders want to do now?

Three guesses, and the first two don’t count:

Recession has taken hold in parts of Europe, and the euro zone’s stubborn crisis risks a worldwide shock. Growth is slowing in major developing nations, and the U.S. economy may be faltering.

When world leaders take stock at a summit next week in Mexico, they’ll face the discomforting fact that four years of crisis-fighting, trillions of dollars in government stimulus spending and a massive effort from the world’s central banks have failed to produce the “strong, sustainable and balanced” world economy they are striving to build.

And you have to love the question that comes next — and its answer:

Is it time to open the cash spigot again?

“That would be highly due,” said George Pagoulatos, an economics professor who has watched this battered Mediterranean country cut wages in hopes of making its exports more competitive — only to find its major trading partners facing problems of their own. “There is no global demand and no demand in the euro zone,” a situation that leaves Greece with a worsening recession and no clear path to renewed growth.

Investors may be banking on policy action. On Tuesday, U.S. markets gained on speculation of a coming stimulus measure from the Federal Reserve after next week’s Fed policy meeting and after the European Central Bank endorsed a plan to guarantee bank deposits, Bloomberg reported.

Of course it’s time to borrow wildly again … in an attempt to reverse a debt crisis. Hey, as any gambler at the track can tell you, the best way to pay off Vinny The Nose is to get more cash from a loan shark and bet on the long shot in the eight race. This time, our horse economy will make it to the finish line instead of the glue factory!

The good news? There is exactly zero chance that Congress will hand Barack Obama another blank check this summer. First, House Republicans are adamantly opposed to further stimulus spending; second, Senate Democrats won’t even bother passing a budget for normal spending, let alone extraordinary spending. Obama could use that as political fodder in the upcoming campaign by blaming the economic slide on the lack of a second stimulus package, but Obama’s spent the last three years claiming that his first economic stimulus package has already saved the private-sector economy. “The private sector is doing fine,” Obama assured everyone last week, and so that makes it difficult to argue for Hairofthedogonomics.

The only way to get over the hangover is to stop drinking. Fortunately, we are in position in November to take the first step of a 12,000-step program for the US to dry out on debt and deficit spending.

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We are not in a debt crisis. How is debt stopping the economy from moving? We are in a spending crisis, or lack thereof. Big businesses are sitting on record cash reserves but refuse to spend. All the tax breaks in the world won’t fix this. Our last stimulus was barley stimulus at all, as it was mostly tax cuts and paled in comparison to even Reagan era cash injections.

Considering that a recession/depression is by definition an economic contraction, I’ve never understood posts like this which argue for a forced economic contraction. It’s like slamming on the gas while heading for the cliff.

And in case 100 years of economic theory wasn’t enough, compare austerity bonanza countries like Greece to countries like Canada and Sweden who refused to buy into it. A pattern quickly emerges. But we all know that the GOP plan is to sabotage the economy, so why are we kidding ourselves?

Of course, you know that Obama is going to say the economy would be better if it weren’t for those Republicans in the House blocking his stimulus and tax increases. And the morons who put him in office will believe him.

Of course, you know that Obama is going to say the economy would be better if it weren’t for those Republicans in the House blocking his stimulus and tax increases. And the morons who put him in office will believe him.

NYC is up for it. Just imagine: When our currency is so worthless that you need a wheelbarrow-full just to buy a loaf of sawdust bread, you will get much needed exercise carting around your wheelbarrow trying to buy the necessities to stay alive.

It’s astonishing that there are people calling for “another stimulus”.

Too few people realize that the “2009 stimulus” was not a one-time $873 BILLION+ outlay. The government has been spending this amount over and above its normal amounts every year since then. The 2009 spending, including the stimulus, has been used as the baseline (starting point) for continuing resolutions in 2010, 2011, and again now in 2012.

Every year since 2009 has included the $873 BILLION+ in its overall spending! No wonder Harry Reid doesn’t want to pass a real budget.

Businesses are sitting on cash because they would be idiotic to spend it in this environment. Obama and the Dems have created an environment of instability that threatens businesses with future taxes, fees and regulation.

They are waiting to see if Obamacare is allowed to stand and it drives them out of providing healthcare coverage for their employees. They are waiting to see if another President steps in and puts the brakes on regulations that slow business development and projects. They are waiting to see if anything will be done about the pending tax increases if the Bush tax breaks are allowed to expire (since customers with less money will spend _____).

So in other words, they are holding onto their money as a hedge against the stupidity of this arrogant and greedy administration, egged on by a waning Democratic-controlled legislature.

All of this could be immediately alleviated if the administration and the Dems in Congress would loosen the regulations, allowing full energy production (by opening up federal lands/offshore which would affect speculation) and lowering/stabilizing taxes.

Obama and the Dems have created this environment of instability and seem surprised that businesses would react this way in a time of uncertainty. But anyone with half a brain wouldn’t be surprised at all!

Rhetorical questions only: Is Obama priming the pump (not only to appease his base with more goodies but) to push for another continuing resolution (whose failure to pass will be blamed on those “obstructive Republicans” even though the Senate has not passed a budget for how many years???) and to guarantee another credit downgrade?

Would anyone here permit the Dems or Obama and his band of merry con men to handle their own personal finances? I thought not.

So they factored the last stimulus into the baseline and continued spending long past where a drunken sailor would have stopped giving us nearly 1.4 trillion dollar deficits. Now they are crying for another stimulus which will skyrocket the deficits into the 2 trillion dollar range. Will somebody please point me to the wormhole leading back to reality.

Strategic obstructionism is all this is…propose legislation to see it defeated to create more blame game…what the doofus will overlook is he will see BI-PARTISAN opposition to his scams so Dems up for reelection can save their own bacon…FAIL.

As Obama’s policies prove more and more successful expect GOP to try to claim ownership of them.

lester on May 8, 2012 at 8:49 PM

Don’t worry. Disaster is an orphan.

PS: You guys said the same thing about the Supercalifragilisticexpialidocious Stimulus Act of 2009. You swore that we’d be sorry for not coming on board.

“You just wait until the summer of 2009. The economy is going to be exploding back to life and you arsewipes will be left out and seen as the OBSTRUCTIONIST LOSERS that you are. Obama will be the next FDR. He will cruise to reelection and be so popular that an overwhelming majority of Americans will demand a repeal of the 25th Amendment.”

The Fed is printing money, plain and simple. China isn’t the buyer of these Treasury securities, the Fed is, and it can only buy using freshly printed Weimar Republic errrr….United States dollars.

Today, the Federal Reserve is the largest buyer and owner of U.S. Treasury securities issued in the last two years. When you add the Fed’s holdings to U.S. commercial bank holdings, which are only more Fed money creation in the disguise of invented “Reserves” that are required to be invested in Treasury debt, the total makes the United States banking system the biggest holder of recently issued U.S. sovereign debt in the world, bigger in fact than all foreign holders combined.

Someday, the Fed will have to sell those bonds so that the newly-issued dollars can be withdrawn from circulation. This is the central function of the Fed, to manage the money supply so as to prevent inflation. This should scare the living crap out of everyone, because who bill buy those bonds? Obama? Geithner?

Big businesses are sitting on record cash reserves but refuse to spend. All the tax breaks in the world won’t fix this.

They are sitting on $2 trillion that they can’t bring back without having to pay taxes on it — 35% — they’ve already paid taxes on the money where it was earned. If they do that, shareholders, including union pension funds, will fire management and the boards. The US is one of the only, if not the only, countries in the world that taxes corporate earnings that have already been taxed where earned overseas.

Allow them to repatriate tax-free or at a very reduced rate and you’ll have the biggest stimulus in history and it won’t cost us a thing. The loss of any taxes will pay for itself in reduced UE, foodstamps, etc.

Of course, you won’t be able to control how it is spent…..

And, yes, business always love cheap money from the Fed. It inflates their balance sheets and stock prices.

Our last stimulus was barley stimulus at all, as it was mostly tax cuts and paled in comparison to even Reagan era cash injections.

Rainsford on June 13, 2012 at 10:49 AM

You people really MUST stopped listening to The Ferret.

Let’s compare Reagan’s first 5 years to Obama’s first four years (I’m being extra nice to Obama considering there was no Bush FY2009 budget and 1981 was Carter’s budget); Reagan’s first 4 full years to Obama’s tenure; and, Reagan’s entire presidency to Obama’s term:

Reagan 5 v. Obama 4

Average from 1981-1985

Spending-to-GDP: 35.23%
Deficit-to-GDP: 4.25%
Debt-to-GDP: 50.18%

Average from 2009-2012

Spending-to-GDP: 40.94%
Deficit-to-GDP: 9.04%
Debt-to-GDP: 111.75%

First term:

Average from 1982-1985

Spending-to-GDP: 35.63%
Deficit-to-GDP: 4.68%
Debt-to-GDP: 51.86%

Average from 2009-2012

Spending-to-GDP: 40.94%
Deficit-to-GDP: 9.04%
Debt-to-GDP: 111.75%

Reagan’s Entire Presidency v. Obama’s Tenure

Average from 1981-1989

Spending-to-GDP: 35.18%
Deficit-to-GDP: 3.91%
Debt-to-GDP: 56.73%

Average from 2009-2012

Spending-to-GDP: 40.94%
Deficit-to-GDP: 9.04%
Debt-to-GDP: 111.75%

No, Krugman, Reagan Was Not The “Keynesian” And Obama Is Not The “Anti-Keynesian”

That there is not a single Democrat on the planet that understands the concept of fiscal responsibility means that like lemmings they will continue to run straight for the cliff into the abyss below with little to no concern….

We are not in a debt crisis. We are in a spending crisis, or lack thereof.

Rainsford on June 13, 2012 at 10:49 AM

Actually, we are at a point where the interest on our debt is greater than the total budget of many foreign countries.

Companies won’t spend because they don’t know what inane thing the government will propose next.

A rough household analogy with very approximate numbers.

You make $100,000 a year. You spend $200,000 a year. You owe (mortgage, credit cards, car loans, etc.) about $800,000. What do you do?

I’d start by cutting my spending to $100,000. I just don’t see how increasing spending in this situation will end well. We haven’t cut spending at all (despite Pelosi’s “This is the end of life on earth as we know it”). All the posturing last year came down to “Oh, if you insist, I’ll only spend $220,000 next year”.

It never seems to amaze how quickly wealth can disappear into the ether with bad economic choices. Just like people can get richer globally, so can we get poorer globally. You can make money out of nothing, but it can also vanish into nothing.

When Congress does not pass a new stimulus, I’m quite sure we’ll be seeing Captain Bernanke pulling the QE4 into port. It’ll be the taxpayers sitting in steerage class without enough lifeboats when the ship hits the fiscal iceberg.

When Congress does not pass a new stimulus, I’m quite sure we’ll be seeing Captain Bernanke pulling the QE4 into port. It’ll be the taxpayers sitting in steerage class without enough lifeboats when the ship hits the fiscal iceberg.

gravityman on June 13, 2012 at 1:41 PM

My exact thought. As Rick Perry said, “a man could hung for doing this type of thing in my neck of the woods”, or something like that.

The 2010 elections stopped much of the spending from continuing, and the 2012 elections will expel the vomit.

AZCoyote on June 13, 2012 at 11:10 AM

Not to pick on you, but the 2010 elections didn’t stop one single penny from being spent. Check the govt’s own numbers, the amount of money they are spending continues to go UP. Tea party congress indeed.

The Depression was severe because of a huge failure of the Federal gov’t and the Federal Reserve. They sat and did nothing while 1/3 of the currency within the economy was destroyed and with it all the capital spending. Keynes solution for stimulus was purely targeted at addressing the problems of the Depression and specifically the lack of autonomous spending. He did not advocate continuous and non-stop spending and deficits just for the sake of spending and deficits. The problem is the government is so fearful of another devaluation that they always print more money they we really need. That leads to crippling inflation and a cycle of spending that is very hard to break free from. At first inflation is good in that some people profit from all the extra cash. But eventually the cost of living catches up and demand slumps. The reaction, like any drug user, is inject more cash and return to the good times of early inflation. But it just leads you down a rabbit hole till one day you end up like Germany and experiencing hyperinflation. The Germans have a much different view of how to deal with recession because they know and have experience and fearful of inflationary practices. Once a cycle of inflation occurs and a serious effort to combat it is put under way it can take as long as 5 years until the economy returns to normal. But if you really take it head on then it can be reduced to 2 years but it will be a really painful 2 years. I say if you have to pull that bandage off then just pull it all at once and get it over with.